22/03/26

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Gold has experienced significant volatility over the past few days, following a sharp two-day decline that brought prices to their lowest level since early February. As of now, gold (XAU/USD) is trading around $4,687, below an intraday high of approximately $4,735. The metal is on track to record its third consecutive week of losses, reflecting shifting investor sentiment amidst a backdrop of heightened interest rate expectations.

This downturn is largely driven by a global monetary policy environment characterized by persistent tightening. Major central banks, including the Federal Reserve, Bank of Japan, Swiss National Bank, Bank of England, Bank of Canada, and European Central Bank, opted to hold interest rates steady, while the Reserve Bank of Australia raised rates amid rising inflationary pressures driven by higher oil and energy prices amid ongoing Middle East conflicts. Despite gold’s traditional role as an inflation hedge and safe haven, demand has waned as markets recalibrate expectations for future interest rate trajectories.

Market participants are now pricing in a prolonged period of higher rates, with the Federal Reserve anticipated to keep rates elevated through 2026 instead of cutting within this year. Similarly, the European Central Bank has signaled potential rate hikes by July and December, a shift from previous expectations of policy pauses. Meanwhile, the Bank of England and Bank of Canada are also expected to implement further hikes amid stubborn inflation concerns, while the Bank of Japan maintains a cautious tightening path. These shifts in monetary policy have increased the opportunity costs of holding non-yielding assets like gold, especially as the US dollar continues to strengthen.

The US dollar’s gains are further supported by rising US Treasury yields, which are influenced by expectations of sustained higher interest rates and fading prospects of imminent rate cuts. Additionally, geopolitical tensions in the Middle East remain unresolved, with recent signals indicating potential escalation, which generally bolsters demand for the dollar as a refuge.

From a technical perspective, gold’s recent decline has reinforced a bearish outlook. The Relative Strength Index approaches oversold levels, and key moving averages suggest further downside risk if key support levels are broken. Conversely, a rebound above the 100-day SMA could signal the possibility of a recovery, with resistance levels around the $5,000 level representing potential targets for renewed bullish momentum.